More Protection For Those Who Make Prepayments

When companies like spas and hair salons go bankrupt, customers who purchased prepaid packages can end up with worthless credit.

However, the Ministry of Trade and Industry (MTI) is now looking at requests to amend the law in order to protect such prepayments. It would also carry out a public consultation to gather feedback on the proposed changes to the Consumer Protection (Fair Trading) Act (CPFTA).

The Consumers Association of Singapore (Case) told The Straits Times that it would like the law to be changed to make it illegal for firms to collect prepayment without offering protection for consumers, e.g. through insurance.

This would allow Case to take a court injunction against any firm which defies the Act, and the firm would have to stop its unfair practice or be charged for contempt of ourt.

Seah Seng Choon, executive director of Case, described the possible amendment as a “game changer”. He said the association first proposed the change to MTI early this year and sent a reminder two weeks back.

Mr Seah surmised that more than 80 per cent of businesses here that collect prepayments do not offer protection to customers.

“We want all prepayments to be protected,” he said, adding that companies can do so through methods such as taking out insurance, letting parties like EZ-Link act as custodians of prepayments, or working with banks to hold funds in escrow. “If the amendment is made, it will be a game changer because we will have the ability to require the business to put in place such protection,” said Mr Seah.

He added that consumers should not bear the brunt of business failures and companies which cannot protect customers should not collect prepayments.

MTI told The Straits Times: “We note that there have been requests to legislate the requirements to protect prepayments. (We are) considering the matter.”

When the public consultation will be called has not been decided, but such consultations usually take about four to six weeks. The feedback is evaluated when drafting an amendment Bill to be tabled in Parliament.

What kind of protection should be given to consumers who make prepayments for services?

Source: “Protecting consumers who make prepayments”, (The Straits Times, 21 October 2015)